EnWave Remains Strong Cash Flow Positive
EnWave Corporation (TSXV:ENW – $1.29 CAD & OTC:NWVCF – $0.99 USD & Frankfurt:E4U – €0.81) offers industrial-scale dehydration technology for commercial applications in the food, cannabis, and pharmaceutical spaces. The Company’s Radiant Energy Vacuum (“REV™”) platforms are becoming the new global dehydration standard, as they are faster and cheaper than freeze drying, and have better end product quality than both air drying and spray drying.
The Company’s most important achievement during the second quarter, which ended March 31 2018, was the acquisition of the 49% non-controlling interest in NutraDried LLP (NutraDried), bringing the Company’s ownership to 100%. On the basis of annualized fiscal 2018 net income, the Company paid a purchase multiple of only 2.1x net income to acquire the 49% non-controlling interest. A very attractive deal indeed!
NutraDried, which manufactures and distributes Moon Cheese, generated sales of $2.36 million in the second quarter, ended March 31, 2018 compared with $1.40 million in the second quarter of 2017. An increase of almost 70%. These were the highest ever single quarter sales for Moon Cheese. The strong rise was partly due to several substantial orders from Costco’s Midwest, Northwest and Southeast divisions for club format Moon Cheese. NutraDried furthermore reported $716,000 in net income for fiscal year 2017, and $1,086,000 for the first half of 2018.
With solid profit margins and additional revenue opportunities, NutraDried is well positioned for growth, which in turn further solidifies the business case for the use of EnWave’s technology to produce high quality, nutritious snacks.
EnWave continued to be cash flow positive with cash flow from operations of $319,000 for the first two quarters of 2018, compared to a negative cash flow of $46,000 for the first two quarters of 2017.
The rapid progression of EnWave’s relationship with Tilray is significant as the cannabis sector is still within the early phases of legalization in many parts of the world. Therefore, the growth implications are very attractive in this market vertical.
Tilray has chosen to partner with EnWave and utilize REV-processing because it contributes to a more efficient production scenario. The stature of Tilray as a respected participant in the international cannabis market increases the likelihood of attracting additional licensed partners to use REV technology.
EnWave’s management remains very bullish on the entire cannabis sector and continues to work towards securing additional agreements in Canada and international markets.
We reiterate our buy recommendation for EnWave Corp. with a price target of $3.46, which is 168% above today’s stock price.
Download the second quarter 2018 EnWave Corp. Company Report.
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